2025 (4) TMI 391 - AT - Income Tax

Exemption u/s 11 and 12 - AO proceeded to complete the assessment of the assessee trust as an AOP denying the assessee s claim of donation/contribution received from farmers as corpus/capital receipts for the reason that confirmations from the respective donors/farmers were not submitted by the assessee and also for the reason that the assessee was not registered u/s.12A and hence the said receipts could not be considered for claim of exemption u/s.11 12 - AO denied the assessee s claim of exemption u/s. 11/12 as the assessee was not a registered trust u/s. 12A in AY 2011-12 and brought to tax the entire receipts of donations to tax under the provisions of section 68 of the Act mainly for the reason that the assessee failed to substantiate the said receipts by filing confirmations from the donors due to which the genuineness of the transactions(s) remained unproved. CIT(A) confirmed the action of the AO observing that the donations were anonymous and applied the provisions of section 115BBC. HELD THAT - We also observe that during the appellate proceeding before the CIT(A) the assessee made its alternate claim for exemption u/s.10(23C)(iiiad) which the CIT(A) rejected mainly for the reason that no such claim was earlier made before the AO and in the return of income filed by the assessee and also on account of lack of any supporting documents furnished by the assessee in support thereof. AR submitted that the assessee has filed additional grounds of appeal along with additional evidences in respect of its alternate claim for exemption u/s.10(23C)(iiiad) of the Act which goes to the root of the matter and hence requested for admission of the same. As further submitted that given an opportunity the assessee is in a position to substantiate its case before the lower authorities by furnishing the requisite supporting documentary evidences in support of its claim. He therefore made a request to set aside the matter to the file of the AO/ CIT(A) for adjudication afresh on merits in the light of these additional grounds/additional evidences filed by the assessee. We find some force in the above arguments of the Ld. AR. On Perusing the additional grounds/evidences filed by the assessee we find that the same goes to the root of the matter and in the absence of any contrary material brought on record and any objection raised by the Revenue to the above proposition of the AR we deem it fit to admit the additional grounds/evidences filed by the assessee. Hence the additional grounds/ evidences raised by the assessee are hereby admitted. Since the additional evidence field by the assessee needs verification considering the totality of the facts and in the circumstances of the case enumerated above and in the interest of the justice and fair play and without going into the merits of the case we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to decide the issues afresh on merits in light of the additional grounds and additional evidences filed by the assessee after allowing the reasonable opportunity of being heard to the assessee who shall provide the requisite support in terms of submitting the relevant documents/evidences as may be required/ called upon. Appeal of assessee is treated as allowed for statistical purpose.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this appeal were:

1. Whether the assessee trust was entitled to exemption under sections 11 and 12 of the Income Tax Act for the Assessment Year 2011-12, despite not having registration under section 12A during that period.

2. Whether the donations received by the assessee trust could be treated as anonymous donations under section 115BBC of the Income Tax Act.

3. Whether the assessee trust was eligible for exemption under section 10(23C)(iiiad) of the Income Tax Act, which pertains to educational institutions with annual receipts not exceeding a prescribed limit.

4. Whether the procedural aspects, such as the denial of opportunity to present additional evidence and the application of section 115BBC without a remand report, violated principles of natural justice.

ISSUE-WISE DETAILED ANALYSIS

1. Exemption under Sections 11 and 12

Relevant legal framework and precedents: Sections 11 and 12 of the Income Tax Act provide exemptions for income derived from property held under trust for charitable or religious purposes, subject to registration under section 12A.

Court's interpretation and reasoning: The Tribunal noted that the assessee was not registered under section 12A for AY 2011-12, thus disqualifying it from exemptions under sections 11 and 12. The registration was effective only from 01.04.2012.

Key evidence and findings: The trust's claim for exemption was based on its educational objectives, but the lack of registration for the relevant year was pivotal.

Application of law to facts: The Tribunal upheld the denial of exemption, aligning with the statutory requirement for registration.

Treatment of competing arguments: The assessee argued for retrospective application of registration benefits, but the Tribunal adhered to the statutory provisions.

Conclusions: The exemption under sections 11 and 12 was rightly denied due to the absence of registration under section 12A for the relevant year.

2. Anonymous Donations under Section 115BBC

Relevant legal framework and precedents: Section 115BBC taxes anonymous donations received by certain entities, including educational institutions, at a specific rate.

Court's interpretation and reasoning: The Tribunal considered the affidavits from staff indicating no actual receipt of donations, leading to the classification of donations as anonymous.

Key evidence and findings: The affidavits suggested fabricated entries in the books, lacking donor identification and transaction genuineness.

Application of law to facts: The Tribunal found the application of section 115BBC justified, given the absence of donor details and the affidavits' content.

Treatment of competing arguments: The assessee contested the anonymous classification, citing maintained records, but failed to present these records initially.

Conclusions: The donations were treated as anonymous due to insufficient evidence to prove otherwise.

3. Exemption under Section 10(23C)(iiiad)

Relevant legal framework and precedents: Section 10(23C)(iiiad) exempts income of educational institutions with annual receipts below a prescribed threshold.

Court's interpretation and reasoning: The Tribunal noted the lack of initial claim for this exemption and supporting documents during earlier proceedings.

Key evidence and findings: The assessee's failure to substantiate its educational purpose and receipts within the prescribed limit was critical.

Application of law to facts: The Tribunal found the rejection of the exemption justified due to procedural lapses and lack of evidence.

Treatment of competing arguments: The assessee cited the educational nature of its activities, but the Tribunal emphasized procedural adherence and evidence.

Conclusions: The exemption under section 10(23C)(iiiad) was denied due to procedural and evidential shortcomings.

4. Procedural Aspects and Natural Justice

Relevant legal framework and precedents: Principles of natural justice require fair opportunity to present evidence and arguments.

Court's interpretation and reasoning: The Tribunal acknowledged the procedural lapses and the need for a fair opportunity to present additional evidence.

Key evidence and findings: The assessee's additional grounds and evidence were admitted, recognizing their potential impact on the outcome.

Application of law to facts: The Tribunal decided to remand the case for reconsideration with the new evidence.

Treatment of competing arguments: The Tribunal balanced the procedural deficiencies with the need for a comprehensive review.

Conclusions: The case was remanded to allow the assessee to substantiate its claims with additional evidence.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The Tribunal emphasized the need for procedural fairness and the opportunity to present evidence, stating, "We find some force in the above arguments of the Ld. AR... the additional grounds/ evidences raised by the assessee are hereby admitted."

Core principles established: The decision reinforced the importance of statutory compliance for exemptions and the necessity of procedural fairness in tax proceedings.

Final determinations on each issue: The Tribunal upheld the denial of exemptions under sections 11 and 12, and section 10(23C)(iiiad), confirmed the classification of donations as anonymous under section 115BBC, but remanded the case for reconsideration with additional evidence.